To us, America’s pivot to Asia was the most significant discussion of President Obama’s first term. It marked the need to veer away from America’s decade old engagement in the Middle East towards Asia, the most important region in today’s world. But we have always wondered whether the so-called pivot to Asia was more of a Secretary Hillary Clinton initiative than that of President Obama. Look what has happened in President Obama’ second term – attention to what is near and dear to Secretary Kerry’s heart – Syria, Israel-Palestinians and now Ukraine. No one in the Administration has found any bandwidth to focus on Asia.
Every Administration comes to power with an overriding theme. President Obama, much like Nehru, came to power with the theme of changing the world with better ideals & “21st century” goals. Centuries old geostrategy frameworks based on history, geography and national self interests were deemed passe by the Obama brain trust. This Nehru-like idealistic approach to the world was quickly focused on that obviously dirty polluting and so last century evil called Oil and Gas. Just read the op-eds of NYT’s Tom Friedman during the early years of the Obama Administration. Friedman and his cohort virtually declared a war against Hydrocarbons in those days. This hate for fossil fuels blinded, a charitable term, the Obama brain trust to the simple reality that the world was still critically dependent on oil & natural gas and would remain so for the foreseeable future. These blinders were enlarged and darkened by America’s new found “energy independence”.
The above two came together this week in helping to seal a huge long term natural gas deal between Russia and China. This deal has been in the works for years. It was hard to close because both countries are hard negotiators who had no real imperative to close the gap between them. Russia has a large almost captive market in Europe and China had other suppliers. China & Russia are neighbors and large neighbors hardly ever become allies. Add the old distrust between these two countries and you will see why they were in no major hurry to get this deal done.
Into this stepped the Obama Administration with Iran sanctions and now sanctions against Russia. We have described the Iran sanctions as cutting off the World’s nose to spite Iran’s face. If you are China, whom would you choose as a reliable long-term natural gas supplier – Iran or Russia? But the US sanctions against Iran changed the calculus and made Iran a riskier partner for China.
The sanctions against Iran have been pronounced a great success by the Obama Administration, a financial “Sitzkrieg” in a manner of speaking. So the same tactics are now being applied against Russia. And these tactics do serious damage. Add to that the possibility that Europe, under American pressure, could eventually impose sanctions against Russia figuring that Russia had no other choice but to sell natural gas to Europe. This forced Russia to accelerate the timetable for diversification beyond Europe. To quote Stratfor,
- “Moscow has long been wary of Chinese involvement inside Russia; it has preferred to deal with Western partners. But with Western investors currently withdrawing from the country, China would be an suitable replacement.”
As we wrote in our April 26, 2014 article about The Curse of Oil,
- “China has witnessed America’s financial war against Iran. If they see America using its massive financial arsenal against Russia, they have to wonder whether China will be next.”
Stratfor put it much more emphatically this week:
- “China now has sufficient interest in cooperating with Russia to avoid conflicts — whether direct or in their overlapping spheres — that could detract from Beijing’s ability to manage attempts at containment by the United States and its allies. … Beijing’s willingness to enhance its strategic relationship with Moscow reflects its belief that the United States poses a far greater threat to Chinese interests than does Russia.”
Ergo this week’s “landmark” or “epochal” deal between China and Russia. This deal put together a huge long term supplier and a huge long term buyer. It puts together a cash-strapped Russia and a cash-rich China. It gives China a minority stake in Russia’s energy sector and Russia probably gets financing to develop its natural gas reserves near the Mongolian border and to construct pipelines. And China will reportedly pay for Russian natural gas in U.S. Dollars. This creates a new and higher hurdle for any attempts to throw Russia out of the U.S. Dollar system.
This is why both China and Russia should, & perhaps do, thank the Obama Administration for triggering the imperatives that made this deal possible.
A Multipronged Pivot to Asia?
Japan is even more dependent on Middle Eastern energy than China. And unlike China, Japan does not have any land access to Turkmenistan or other Central Asian suppliers of natural gas. And if China were to convert the South China Sea into its “lake”, Japan’s access to the Middle East would become much more difficult. As a major producer, it is in Russia’s interest to find as many buyers as possible, especially large, cash rich buyers like Japan who can finance Russia’s investments in energy. And both Japan and Russia are wary of China’s growing power.
This is why Russia and Japan have been in discussions for over a year. Among the projects discussed is a pipeline from Russia to Japan either under the sea from Vladivostok to Japan or through the North-Korean and South-Korean coastal areas.
If realized, this joint venture has the possibility of turning Japan into a Germany-type ally of the United States – an ally in most areas but one unwilling to confront Russia or actively participate in a US-led sanctions regime against Russia.
Vietnam has always been a pivotal country in Southeast Asia with a direct corridor to Malacca Straits and directly accessible from Russian ports. Russia was one of the first countries to recognize the Ho Chi Minh government in 1950. Russia & Vietnam were allies then and are now naturally allied in their desire to limit Chinese expansion in South east Asia. Putin made his first trip to Vietnam way back in 2001 and Russia has signed several deals with Vietnam in energy and defense.
Vietnam can become a foothold for the Russian energy sector to expand to other Southeast Asian countries. A growing Southeast Asian market could possibly help Russia get better terms from Northeast Asian countries like Japan and South Korea.
The landmark deal with China will naturally create a greater need and desire in Asia to work with Russia’s energy and defense sectors. And Russian deals don’t come with US moral lectures or threat of US sanctions like the ones imposed on Myanmar for years or the ones contemplated against Thailand now.
This broad multipronged Russian effort and this week’s landmark deal with China demonstrates the stark contrast between Russian efforts in Asia and the Obama’s Administration’s preoccupation with the Middle East & Ukraine. Historically, a regional power is supposed to concentrate i
n its own region while a global superpower is supposed to be able to simultaneously focus on the entire world and bring its global reach to bear on the regional power.
Unfortunately, it seems as if Russia is acting like a global power and acting in Russia’s interest simultaneously in Asia & Europe while America remains preoccupied and stuck in Western Europe & Middle East.
This may be why a guest on Fox’s Special Report with Bret Baier said this Friday,
- “I see a pivot to Asia but Vladimir Putin is making it, not Obama.”
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